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How Much Savings Should I Have at 40?


One way to evaluate how well you’re saving for retirement is based solely on your age. A common age-based estimate for retirement savings holds that a 40-year-old should have approximately three times their annual salary set aside for retirement. There are a number of other takes on this topic, with various sources suggesting anywhere from two times to 10 times or more annual salary is a more appropriate target. In reality, there is no age-based retirement savings benchmark that fits every retirement saver. Factors such as age at retirement, pre-retirement income and expected post-retirement spending, among others, can significantly impact this figure. To get a better understanding of your retirement readiness, talk to a financial advisor.

Age-Based Retirement Savings Recommendations

Saving up for retirement for most people is a decades-long process that begins in the early working years and continues until at or shortly before retirement. Along the way, savers can get an idea of how well they are doing based solely on their age and income.

With this approach, retirement savers are given an estimate of the amount they should have saved by a certain birthday. These recommendations are usually expressed as a multiple of the saver’s current annual earnings to be saved by a significant birthday, usually one birthday each decade. The closer the pre-retiree is to retirement, the larger the multiple.

For instance, Fidelity Investments says that a typical worker should have three times their annual salary by the time they reach age 40. That is, if you’re earning $58,604 a year like the median 35- to 44-year-old, you should have three times that amount or $178,812 in your retirement account. This number starts at 1 times earnings for a 30-year-old and goes up to 10 times for a 67-year-old.

This is only one recommendation for 40-year-olds, however. Using a different set of assumptions, T. Rowe Price estimates that a 40-year-old will need about twice their annual salary in savings. Price also presents its estimates as a range rather than a single number. The 40-year-old saver might find 1.5 to 2.5 times their annual salary an adequate savings figure, the company says. The difference depends on, among other things, the worker’s earnings and post-retirement spending plans.

About three times annual earnings are likely the most common recommendation size for a 40-year-old’s savings. Merrill Lynch parent Bank of America issued a recommendation of 3.1 times, for instance. But some outliers recommend an average earner should have four, five or even more than 17 times their annual earnings in a retirement account by age 40.

Reasons for Recommendation Variations

how much savings should i have at 40

A blanket recommendation to save up a multiple of annual earnings by 40 is a blanket that doesn’t cover all beds. That’s because of the considerable effect some key variables exert on retirement savings sufficiency.

Age at retirement is one of the most important. Retiring before or after the average retirement age of 64 clearly has an effect on how long retirement savings must last. Planning to stop working by age 60 earlier calls for more savings by age 40, that is, while working until 70 could allow for a smaller age-40 savings goal.

Other influential variables include pre-retirement income and post-retirement spending plans. People who earn more and will spend more will likely need to save more.  The annual returns earned by a retiree’s investment portfolio will similarly have a big effect. A conservatively invested portfolio with low returns needs to be larger to support a comfortable retired life.

The Bottom Line

Instead of simply trying to save as much as you can for retirement before age 40, you can evaluate how much you need to have set aside by using an age-based savings retirement recommendation. These simple rules of thumb often suggest that a typical 40-year-old has three times their annual salary in the bank in order to fund a comfortable retirement. Other recommendations may call for a lot more or somewhat less in savings by the start of your fifth decade. And any one-size-fits-all benchmark may need to be altered to suit your individual circumstances.

Tips for Retirement Planning

how much savings should i have at 40

  • You don’t have to grapple with the intricacies of retirement planning on your own. A financial advisor can help you consider your entire situation to come up with a plan that fits your needs. Finding one doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • Before you assume that a retirement savings benchmark based on age or any other variable is right for you, take a look at SmartAsset’s Retirement Calculator. This free online tool considers your unique situation to generate tips on how much you will need, as well as how much to save, how much your investments should earn and the effects of location, retirement age and other factors.

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